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illyfrancis edited this page Jul 9, 2013 · 36 revisions

Global custody

For Funds (Mutual funds / Exchange traded funds)

  • NAV - (Net Asset Value)[http://www.investopedia.com/video/play/net-asset-value/]
    • video explaining...

Derivatives

  • Three categories
    • OTC - customized, bilateral agreements that transfer risk from one party to the other. OTC derivatives, are sometimes called swap agreements or swaps, are negotiated privately between the two parties and then booked directly with each other
    • Standardized, exchange-traded derivatives - listed derivatives or futures. In contrast with OTC derivatives, listed derivatives are executed over a centralized trading venue known as an exchange and then booked with a central counter party known as a clearing house.
    • Cleared derivatives, which like OTC derivatives are negotiated bilaterally but like listed derivatives are booked with a clearing house

Standard deviation

  • variance (before sqrt), so higher the SD more risky it is
  • proper formula
  • Note Population Standard Deviation uses 1/N
  • Sample Standard Deviation uses 1/(N-1)
For example, using Sample SD formula
if the annual rate of return of a security over five terms
Given monthly returns of 2%, 7.5%, 1%, 6%, 1.5%
then the average is 3.6%

(3.6 - 2)^2 = 2.56
(3.6 - 7.5)^2 = 15.21
(3.6 - 1)^2 = 6.76
(3.6 - 6)^2 = 5.76
(3.6 - 1.5)^2 = 4.41

Sum = 34.7 / (5 terms - 1) = 8.675
sqrt(8.675) = 2.9 (standard deviation)

Mean value

  • Arithmatic mean - sum then divide ( (a + b + c) / 3)

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